All posts in category Credit

In the latest sign that Japanese government bond investors, around 95% of whom are Japanese, remain comparatively unconcerned over foreign rating agencies’ moves on Japan’s sovereign ratings, lead March JGB futures are on the rise after Moody’s debt-outlook downgrade, says Christian Carrillo, senior rates strategist at Societe Generale.

Moreover, as Moody’s is seen to be behind the curve on its Japan ratings, “even if they move to downgrade Japan’s rating ahead, I don’t think it would have a big impact,” Mr. Carrillo adds. The USD/JPY has returned to the level it was at after a brief rise Tuesday morning.

LONDON–The cost of insuring debt issued by financially weaker euro-zone sovereigns mostly fell in early trading Tuesday, after the European Central Bank bought bonds issued by some of these sovereigns Monday.

Portugal saw the biggest drop. Its five-year sovereign credit-default swaps were 0.1 percentage points tighter, according to one trader, at 5.35/5.55 percentage points, although the wide bid-offer spread indicates that trading activity is limited.

LONDON–The cost of insuring European corporate and sovereign debt against default fell early Tuesday as strong gains in U.S. stocks overnight boosted confidence that the global economy is strengthening.

Shortly before 3:00 a.m. EST, the iTraxx Crossover index, which allows investors to buy or sell credit protection on 50 mostly sub-investment grade European corporate borrowers, was 0.09 percentage points tighter than late Monday, at 4.26/4.30 percentage points, according to index owner Markit.

The SovX Western Europe index of 15 sovereigns was 0.0125 percentage points tighter than Friday’s close, at 2.045/2.07.

The cost of insuring European sovereign debt using credit-default swaps rose early Thursday, after closing at an all-time high Wednesday.

The iTraxx SovX Western Europe index, which allows investors to buy or sell default protection on a basket of 15 sovereign borrowers, was at 2.0675/2.0875 percentage points shortly after 2:45 a.m. EST, according to index owner Markit. This was up from a close of 2.06 percentage points, and compared with Wednesday’s intra-day high of around 2.10 percentage points.

The SovX Western Europe index has risen steadily since mid-October on worries about the health of euro-zone sovereigns

The cost of insuring Ireland’s sovereign debt against default rose Friday after Moody’s Investors Service Inc. downgraded the country to Baa1 from Aa2 Friday.

The cost of five-year sovereign credit default swaps on the country’s debt rose around 0.1 percentage points to 5.75/5.90 percentage points, a trader said. However there is little liquidity in the market, the trader added.

Portugal’s Treasury and Debt Management Agency sold €500 million ($669.1 million) of T-bills at the shortest end of the yield curve, at an average yield of 3.403%, up 87% from 1.818% at the previous three-month T-bill auction Nov. 3. The bid-to-cover ratio, which indicates demand, fell to 1.9 from 2.2 previously.

The auction results come just hours after Moody’s Investors Service Inc. warned it may downgrade the credit rating of Spain, which plans to auction up to €3 billion in government bonds on Thursday.

Investors are closely watching the government debt tenders in Spain and Portugal amid fears that spiraling borrowing costs could eventually lock out the two countries from the market and force them to seek external help. Government officials from both countries have expressed confidence that such a situation won’t arise, but investors are on guard for any sign of funding weakness.

The Irish five-year credit default swap spread widened to another new record Wednesday as political pressures continued to sour sentiment on the country’s debt.

The resignation of Fianna Fail party member Jim McDaid Tuesday lowered the government’s majority in parliament to just three, raisng more doubt whether the budget will be passed by the December deadline.

Credit market investors are closely watching the government’s attempts to put the nation back on a stable financial footing, one trader said. “It’s a massive task, it’s a herculean task, and there are credit investors speculating it is beyond the government’s capabilities,” he said.

Ireland remains in critical condition this week, but so far, investors are giving Prime Minister Brian Cowen’s embattled government – which threw everything but the kitchen sink at its banking crisis on Thursday – the benefit of the doubt.

The road ahead isn’t easy. Next month, Irish finance minister Brian Lenihan will outline a new four-year plan for getting Ireland’s budget deficit – now estimated at 32% of its economic output – down to the European Union limit of 3% by 2014. A month later, he will announce his budget for 2011. Ireland needs savings to cut its debt burden. The question is: Where will that money come from? Some Irish unions say a deal with the government prevents it from cutting wages of public-sector workers again. That could mean Ireland hikes up taxes instead.

The cost of insuring Irish sovereign debt against default using credit default swaps rose significantly early Tuesday, as concerns about the cost of supporting its banking system continue to worry markets.

We are not Greece. That is the message Ireland sent to investors Tuesday by successfully raising €1.5 billion ($1.96 billion) in funds from the capital markets – markets that are now rife with chatter that the country could soon be the next to be rescued by the European Union.

Investors lapped up Ireland’s new bonds – and it’s not hard to see why. Ireland’s National Treasury Management Agency sold €500 million of bonds maturing in 2014, paying an average yield of 4.767%. Last month, Ireland’s four-year bonds came with a much-less juicy 3.627% yield. Ireland also sold €1 billion of bonds maturing in 2018, with a yield of 6.023%, much higher than the 5.088% yield paid in June. The result: Offers for Tuesday’s bonds surpassed the actual amount on sale by ratios of five to one and nearly three to one, respectively.

Markets reacted positively. The euro edged higher to $1.3137 against the dollar from $1.3061 late Monday, while there are signs of improvement in Ireland’s paralyzed bond market. Ireland still pays an interest rate that is nearly four percentage points higher than Germany, the euro zone benchmark, but this key gap – a measure of Ireland’s creditworthiness – narrowed after Tuesday’s auction. The premium Ireland pays over Germany is now 3.84 percentage points, compared with 4.07 percentage points Monday evening.

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